Author Archives: Scalper1

Are We Near Peak Twitter? Usage Weakens Again Despite New Features

Twitter ( TWTR ) reported late Wednesday that user growth slowed for the fourth consecutive quarter in Q4 as it guided Q1 revenue below consensus estimates, raising concerns that usage may be peaking. The average monthly active user base rose 9% year over year in Q4 to 320 million. Wall Street had expected Twitter to report a 12% rise in users to 323 million. Growth has cooled from 18% in Q1, to 15% in Q2 and 11% in Q3. Excluding “SMS Fast Followers,” monthly active users rose 6% annually to 305 million but fell from 307 million in Q3. Adjusted earnings rose 33% to 16 cents a share. Analysts polled by Thomson Reuters had expected 12 cents. Revenue jumped 48% to $710.5 million, above the $709.9 million consensus expectation. Twitter sees Q1 revenue of $595 million-$610 million, below Wall Street views of $627.1 million. Shares declined 3% in late trading, after rising 4% in the regular session. User growth concerns have depressed Twitter stock, which sunk to an all-time low of 14.31 on Tuesday. Twitter’s report followed LinkedIn’s ( LNKD ) stock crash last Thursday after the professional networking firm gave guidance far below the Wall Street consensus estimate, while also reporting Q4 earnings that beat. The continued slowdown in Twitter usage came despite a series of new features it rolled out last year, including video tool Periscope and Moments. Earlier Wednesday, the social media network said it is testing a new feature that would make the microblog look a bit more like its No. 1 rival, social networking king Facebook ( FB ). ‘Few – If Any – Bright Spots’ Chilton Capital Management economist Samuel Rines told IBD via email that “the user metrics — the key to sustainable future growth — collapsed,” noting that active users fell in the U.S. and were flat internationally. “The decline in users was the truly disappointing part of the release,” he said. “And it is even more disheartening given that there is an election cycle, and (Republican presidential candidate) Donald Trump’s tweets should have been at least somewhat of a draw to the platform. There were few — if any — bright spots in the release.” Rines also directly attributed Twitter’s soft Q1 revenue guidance to its weak user growth. “It now becomes a conversation around whether we have seen peak Twitter usage,” he said. “And management will have a difficult—if not impossible job of proving otherwise without a sudden reacceleration in user growth. It’s tough to see how product usage accelerates—at least with the current product and rate of innovation.” On a call with analysts after the release, Twitter CEO Jack Dorsey said the company “saw some really promising growth with the test of the timeline (changes). We think there’s a lot of opportunity in our product to fix some broken windows and confusing aspects of our service that we know are inhibiting growth.” But user retention rates were positive in Q4, said Twitter CFO Anthony Noto on the call. “The retention rate of those users that we either resurrected or that we acquired new was strong. In fact, new monthly active users acquired through marketing efforts were performing better from a retention rate standpoint vs. new organic MAUs we acquired.” Limited Potential? “So, we will continue to integrate marketing into our strategy,” Noto added. “We are going to simplify the product, but we also have to clearly communicate its value. Marketing will play that role.” In an industry report on Wednesday before the release, Cowen and Co. analyst John Blackledge handed Twitter stock a price cut, to 17 from 26. Blackledge also he lowered revenue estimates for Twitter for 2016 through 2021. Advertising, which makes up 90% of Twitter’s total revenues, will “see continued deceleration over time,” RBC Capital Markets analyst Mark Mahaney wrote in a report last week. “Our concern for some time has been that Twitter’s lack of real-time commercial intent (a la Alphabet ( GOOGL )-owned Google) or detailed, authentic profiles (a la Facebook) will eventually limit Twitter’s growth potential.”

Tesla Motors Soars After Predicting Up To 90,000 Deliveries In 2016

Tesla Motors ( TSLA ) reported a surprise fourth-quarter loss late Wednesday but shares spiked as the electric car maker was bullish on deliveries and said it would unveil its Model 3 mass-market car on March 31. Analyst consensus in a Thomson Reuters poll had called for Q4 earnings per share of 10 cents excluding various items. But Tesla reported an adjusted loss of 87 cents instead, deepened from 13 cents a year earlier. Tesla revenue rose  59%  to $1.75 billion in Q4, short of the $1.79 billion Wall Street view. However, Tesla expects to deliver 80,000 to 90,000 new Model S and Model X vehicles in 2016. Stifel analyst James Albertine had said in a research note Sunday that guidance might come in lower than the 80,000-85,000 vehicles that Tesla had previously anticipated. Tesla delivered 50,658 vehicles in 2015. That includes 17,478 vehicles in Q4, with 206 of the new Model X crossover SUV. Albertine said in a research note late Wednesday that he was “positively surprised” by Tesla’s reiteration of guidance. He noted that “customer deposits ticked higher sequentially, perhaps suggesting demand intact.” Tesla stock spiked 9% to 156.50 in late trading. Shares had closed down 3.1% to 143.67 in Wednesday’s regular session. “I think these are very strong numbers,” Global Equities Research analyst Trip Chowdhry told IBD Wednesday after Tesla’s report. “The guidance is very, very strong: 80,000 to 90,000 of the new Model S and Model X will be delivered in this fiscal year … growth of 60% to 80% a year.” Tesla’s ‘Loss Is A Positive’ The reason, he says, is that customers “want to buy innovative products” — which Tesla excels at making. Chowdhry added: “The loss is a positive. Why? Because they are investing in the future.” A demand chart that Tesla provided with its shareholder letter, on sales of large luxury vehicles “bodes extremely well for the future,” Tesla CEO Elon Musk said on a conference call with analysts. “The Model S was the best-selling premium sedan in the United States of any kind last year. Our sales increased by 51% and everybody else declined.” The 25,202 Model S sedans sold in 2015 topped Daimler ’s ( DDAIF ) Mercedes-Benz S-Class, which sold 21,934 units. The rest on the list all sold under 10,000 units: The BMW 6-Series and 7-Series, Mercedes-Benz CLS-Class, Volkswagen ’s ( VLKAY ) Audi A7 and A8, Tata Motors ’ ( TTM ) Jaguar XJ, Toyota ’s ( TM ) Lexus LS and the Porsche Panamera. Many analysts have questioned Tesla’s ability to ramp up production. For the current Q1 analysts had forecast 8 cents earnings per share, swinging from a year-ago loss, on revenue up 69% to $1.87 billion. Tesla Motors isn’t highly rated by IBD now and has fallen lately, with several analysts cutting views. Tesla stock was down 40% this year through Wednesday’s closing bell, in a market now in correction on concerns about the world economy and falling oil prices. The S&P 500 has fallen 9%, Ford ( F )   20%, General Motors ( GM ) 19%, Toyota 13% and the biggest stock of all, Apple ( AAPL ) 10%. Ford, General Motors, Toyota and Apple shares all fell fractionally Wednesday. “For 2016, we are planning for even faster delivery growth than last year. We plan to be net cash flow positive and achieve non-GAAP profitability for the year, even after investing about $1.5 billion to add more production capacity, start cell production at the (battery) Gigafactory, and establish additional customer support infrastructure.  Moderate GAAP profitability is expected in the fourth quarter. These investments will help prepare the way for Model 3, which is on schedule to be unveiled on March 31st and to start production and deliveries in late 2017,” Musk said in a letter to shareholders. “Tesla is approximately doubling its cumulative sales every year, I’m not sure if this has happened in the car industry for nearly a century,” Musk said on the call. But not everyone is so bullish on Tesla’s future. “Tesla likes to bill itself as a tech company, not an automobile company, but even tech companies have to turn a profit eventually,” said Karl Brauer, senior analyst at Kelley Blue Book. “While volume and revenue are both growing, costs continue to outpace both. Tesla can keep positioning itself for rapid future growth, and its investments in the battery factory and Model 3 suggest it might happen. Someday. The timing of the Model 3 also concerns me because it’s at least a year after the Chevrolet Bolt arrives, and additional pure electrics with a similar range could easily show up by late 2017.” Image provided by Shutterstock . RELATED: 3 Keys To Tesla Earnings As $35K Model 3 A Go: Low Ride, Ramp, View

Cisco’s Steady Q2 Helps Soothe Jittery Enterprise IT Sector

Behind the scenes, Cisco Systems ( CSCO ) did what it was supposed to do last quarter, and did it a little more profitably: It provided reliable networking gear and helped others compute and communicate faster, even as formerly highflying enterprise technology stocks crashed. After Wednesday’s close, Cisco posted fiscal Q2 earnings and sales that beat analyst expectations, as did its earnings and sales outlook for the current quarter. The company’s CEO, however, acknowledged that things have been a bit dicey. While the first 10 weeks of the second quarter, through Dec. 31, were “very much in line with what we expected … (in) those last three weeks (through Jan. 23), we saw customers just pause a bit … to see what’s going on,” Cisco CEO Chuck Robbins said on the company’s earnings conference call with analysts. “The (data center) campus refresh activities, we saw customer say, ‘Hey, our infrastructure is working. Let’s hold on that (purchase) before we see which way we’re willing to go.’ ” Added CFO Kelly Kramer: “Our guidance is prudent. We expanded our range to three (percentage) points of range rather than two, because we see things as more volatile.” For the period ended Jan. 23, Cisco said per-share earnings minus items rose 7.5% from the year-earlier quarter to 57 cents minus items, while revenue slipped 1% to $11.8 billion. Excluding year-earlier performance from the television set-top box business Cisco recently sold, revenue rose 2% . Analysts polled by Thomson Reuters had expected 54 cents and $11.75 billion. A year before, Cisco’s EPS ex items had risen 13% to 53 cents, and sales grew 7% to $11.94 billion. Cisco completed the sale of its Technicolor set-top box unit on Nov. 20, for $600 million. Excluding that business, Cisco had guided Q2 adjusted EPS to 53-55 cents, on revenue of flat-to-2% growth. For fiscal Q3, Cisco guided to EPS ex items of 54 cents to 56 cents and to a year-over-year revenue rise of 1% to 4%. Analysts had modeled 54 cents and a 0.8% decline. Cisco is the No. 1 maker of the seldom-seen but increasingly used, lightning-fast switches, routers and other networking gear behind most telecom and Internet service providers, helping to run many data centers for many Internet cloud-based operations. Cisco stock was up 9% in after-hours trading, after the company released its earnings. In Wednesday’s regular session, shares fell 0.6% to 22.51, 25% off an eight-year high of 30.31, set last March. Smaller rival Juniper Networks ( JNPR ) was up 1.5% after hours, having fallen 1.7% to 21.62  in Wednesday’s regular session. Cisco’s latest results helped the outlook for information technology stocks, which crashed last week after data analytics software maker  Tableau Software ( DATA ) and social media firm LinkedIn ( LNKD ) gave disappointing guidance. As global fears of a slowing economy rose, so did worries of slower IT spending. Analytics firm Splunk ( SPLK ), security vendor  Palo Alto Networks ( PANW ) and cloud software leader Salesforce.com ( CRM ) were among stocks that fell hard last week, though the latter two have recovered somewhat this week. Splunk and Palo Alto were up a fraction after hours Wednesday, but Tableau and Salesforce were down a fraction. Cisco: Challenging Macroenvironment “We delivered a strong Q2 and are managing the business extremely well in a challenging macro environment,” Robbins said in the company’s earnings release. “We’re managing the company on two fronts. We’re focused on continued strong execution in the near term, while investing in the innovation to lead our customers into the future.” As with the sale of its set-top box business, Cisco has been shedding slow-growth lines of business while making acquisitions in faster-growing arenas. Last week, Cisco announced its agreement to acquire Jasper Technologies, which delivers a cloud-based Internet of Things (Iot) service platform, for $1.4 billion.  The deal is expected to close this fiscal quarter. The company last quarter also completed the purchases of Portcullis, a digital security operation; Lancope, a security analytics firm; ParStream, another analytics specialist;  and 1 Mainstream, an on-demand streaming-content company. And on the call, Cisco executives said they recently completed the acquisition of Acano to help accelerate Cisco’s collaboration strategy to deliver video more broadly. In November, Cisco entered a “strategic partnership” with Ericsson ( ERIC ) which both companies say will improve their sales by the second half of this fiscal year. Robbins told analysts that Cisco and Ericsson “have begun to close transactions together. I would not translate that to any of the numbers we put out today. … We’re at the handful stage right now, but we see that accelerating.” “We delivered a strong Q2, and are managing the business extremely well in a challenging macro environment,” Cisco CEO Chuck Robbins said in the earnings release. “We’re managing the company on two fronts. We’re focused on continued strong execution in the near term while investing in the innovation to lead our customers into the future.”